Subscription revenues from services do not constitute royalty under tax law or India-US DTAA.

ORDER

PER OM PRAKASH KANT, AM

This appeal by the assessee is directed against final assessment order dated 27.01.2025, passed by the Ld. Assistant/ Deputy Commissioner of Income-tax (International Taxation) – 1(1)(1), Mumbai (in short the Assessing Officer), pursuant to the direction of Ld. Dispute Resolution Panel (in short ld. DRP) for assessment year 2022-23, raising following grounds:

1. That on the facts and circumstances of the case and in law, the Ld. AO has erred in assessing the total income of the Appellant under Section 143(3) read with Section 144C(13) of the Act at INR 1,47,44,58,663 as against the returned income of Nil.

2. That on the facts and circumstances of the case and in law, the Ld. AO/ Dispute Resolution Panel ("DRP") have erred in holding that the receipts from Indian customers are chargeable to tax as royalty in terms of Article 12(3) of India-US Double Tax Avoidance Agreement ("DTAA") and under Section 9(1)(vi) of the Act.

2.1 That on the facts and in the circumstances of the case and in law, the Ld. AO/ DRP have erred in holding that the subscription charges received under Chemical Abstract Service (CAS) division and Publications (PUBS) division would be chargeable to tax in India under India-US DTAA being received for use of information concerning industrial, commercial or scientific experience and / or for use of industrial, commercial or scientific equipment.

2.2 That on the facts and circumstances of the case and in law, the Ld. AO/ DRP have erred in not following the principle of consistency, while holding that subscription charges received by the appellant are chargeable to tax under the India-US DTAA as being received for use of industrial, commercial or scientific equipment, not appreciating that the same has never been held in the past by the Ld. AO/ DRP.

2.3 That on the facts and circumstances of the case and in law, the Ld. AO/ DRP have erred in holding that the subscription charges received under CAS and PUBS divisions would be chargeable to tax in India under India-US DTAA being received for use of ACS databases / software.

2.4 That on the facts and circumstances of the case and in law, the Ld. AO/DRP have erred in not following the decision passed by the Hon'ble Mumbai Bench of the Income-tax Appellate Tribunal ("ITAT") in Appellant's own case for immediately preceding assessment years i.e. AY 2014-15 to 2021-22, wherein on similar facts and circumstances, the Hon'ble ITAT held that the revenue from CAS and PUBS division cannot be taxed as royalty under Section 9(1)(vi) of the Act as well as Article 12(3) of India-US DTAA.

3. That on the facts and circumstances of the case and in law, the Ld. AO has erred in levying interest of INR 4,32,67,210 under Section 234B of the Act.

4. That on the facts and circumstances of the case and in law, the Ld. AO has grossly erred in computing the aggregate income tax liability (including interest) of the Appellant at INR 19,20,49,126.

5. That on the facts and circumstances of the case and in law, the Ld. AO has erred in computing the correct amount of interest on refund under Section 244A of the Act.

6. That on the facts and circumstances of the case and in law, the Ld. AO has erred in initiating penalty proceedings under Section 270A of the Act.

2. We have heard rival submissions of the parties and perused the relevant materials on record. In the grounds raised, the assessee is aggrieved with the finding of the ld Assessing Officer in holding that the subscription charges received under chemical abstract service division and publication division was taxable as ‘royalty’ under domestic law as well as under India US DTAA, being received for use of information concerning industrial, commercial or scientific experience and/or for use of industrial, commercial or scientific equipment. Before us, the Ld. counsel for the assessee submitted that identical issue has been decided by the Co